Wednesday, April 06, 2011

Natural Gas Prices Fall to Lowest Levels Since 2002

While rising oil and gas prices have captured all of the media attention lately, there’s another energy story about falling prices that has gone largely unreported. According to data released last week by the Department of Energy, natural gas prices for residential consumers fell to a seven-year low in January of $9.80 per 1,000 cubic feet. When adjusted for inflation, American consumers haven’t had cheaper natural gas since December 2002, more than nine years ago (see top chart above, data here). The bottom chart above shows a similar price decline for commercial customers, who paid less for natural gas in January this year (adjusted for inflation) than in any month since November 2002 (data here).

About 25% of energy in the U.S. comes from natural gas, so the falling prices for this energy source should offset some of the rising costs of oil and gas, and also act to offset some of the overall inflationary pressures. Read more here at The Enterprise Blog.

13 Comments:

At a time when our national debt is approaching 100% of GDP, Cuba is drilling for oil just off the Florida Keys and our own oil companies are being prevented by the Democrats from resuming operations in the Gulf of Mexico, it's important to remember that there are trillions of dollars - potentially as many as $6 trillion - of royalties waiting to be collected from the extraction of our own resources.

The left's energy agenda is in reality nothing more than the state imposition economic hardship and poverty on poor and working class Americans through the combination of artificially high energy prices and unsustainable debt. Don't believe for a moment that they are concerned about the environment, their goal is to cripple our economic system.

Quote from Benjamin: "BTW, to the Inflation Chicken Littles: Do you see these charts? Should we start whimpering about deflation?"

Increasing prices is but a symptom of inflation. Increasing the money supply (i.e., inflation) results in many things happening, such as increasing credit, increasing investment in capital markets, and increasing prices. This doesn't happen uniformly across the market any more than anything happens uniformly across the market.

"Earlier this year, Interior Secretary Ken Salazar canceled 77 Utah oil and gas leases that had gone through seven years of studies, negotiations and land-use planning. They were rejected because temporary drilling operations might be "visible" from several national parks more than a mile away. We are not making this up."

"Some of these parcels are in or near the Green River Formation, an oil-rich region in Colorado, Utah and Wyoming that's been called the "Persia of the West."

"This formation has the largest known oil shale deposits in the world, holding from 1.5 trillion to 1.8 trillion barrels of crude. The Energy Department's Argonne National Laboratory indicates 800 billion of these barrels are recoverable with current technology."

The cumulative effect of decisions like these has led to increased energy costs for American businesses and individuals. It also means a lower standard of living for millions of poor and middle class Americans and hundreds of billions of dollars redirected into the hands of sadistic dictators and terrorists - all courtesy of the American left.

Similar to the attack on UCLA's Professor Enstrom for his exposing fraud with regard to diesel particulates, anti-science leftists are attempting to silence a New York State geologist whose findings support "fracking":

"State government's top scientist on the underground features of New York has never weighed in on the contentious matter of drilling in the great Marcellus shale layers stretching beneath a big part of upstate. Until now."

"The worst spin on the worst incidents are treated as if it's going to be the norm here," said Taury Smith, the state geologist, a self-described liberal Democrat more concerned with global warming than extraction of natural gas from one of the largest sources available in the United States. "This could really help us fight climate change; this is a huge gift, this shale."

"He said he has been examining the science of hydrofracturing the shale for three years and has found no cases in which the process has led to groundwater contamination,[emphasis added] although several portrayals by anti-fracking groups and featured in the press have raised concerns about underground pools being harmed because of drilling."

"Those are exaggerated problems; each incident wasn't the result of hydro-fracking. There were incidents of groundwater contamination near frack sites, but they were unrelated," Smith said. He said the industry should be strictly monitored by the Department of Environmental Conservation, and should be encouraged to move the nation away from coal-fired power and to the more environmentally friendly natural gas."

[...]

"The Education Department will not allow Smith to talk to reporters now. Besides muzzling him, the department, which oversees his New York State Museum geology unit, won't permit him to take calls. Instead, the department provided a reporter a copy of its internal protocol for handling media inquiries which says failure to check with the office of communications first would result in "appropriate administrative action."

Add to this the suppression of the scientific findings concerning Yucca Mountain by the Obama administration and you get an idea of the lengths these people will go to to further their anti-science, anti-free market agenda.

those charts say nothing at all about inflation. see the header "inflation adjusted prices"? that tells you inflation is already factored in. the chart tells you ZERO about the inflation rate, just nat gas's price relative to it.

prices could be up 1 million % and natural gas to and you'd get a zero reading.

also note:

oil is up what, 400% since 2000? (that's 16% a year compounded)

it takes a helluva lot of "flat" to offset that in any meaningful way.

perhaps rather than sounding off like a broken record, you ought to actually read these posts and think about them a bit before you let your monetary tourettes take over again.

Initial assessments of 48 shale gas basins containing almost 70 shale gas formations in 32 countries suggest that shale gas resources, which have recently provided a major boost to US natural gas production, are also available in other world regions. A new EIA-sponsored study by Advanced Resources International, Inc. reports initial assessments of 5,760 trillion cubic feet (Tcf) of technically recoverable shale gas resources in 32 foreign countries.

Adding the estimated US shale gas technically recoverable resources (862 Tcf) to the assessments in the study gives a total of 6,622 Tcf. For comparison, most current estimates of world technically recoverable natural gas resources include few if any of the resources assessed in this study and total about 16,000 Tcf.

At a time when our national debt is approaching 100% of GDP, Cuba is drilling for oil just off the Florida Keys and our own oil companies are being prevented by the Democrats from resuming operations in the Gulf of Mexico, it's important to remember that there are trillions of dollars - potentially as many as $6 trillion - of royalties waiting to be collected from the extraction of our own resources.

While I do not disagree about the potential of the Gulf it is important to understand that the shale players can't make any money in natural gas except in some special circumstances unless the price increases significantly from current levels. Expect to see carnage in the sector as the early entrants sell off assets and look to liquids as a way to attract much needed capital.

BTW, to the Inflation Chicken Littles: Do you see these charts? Should we start whimpering about deflation?

The fact that natural gas prices are falling simply means that real demand has fallen. The US is still importing natural gas and still cannot meet its own demand even as shale producers are selling off their product at half the price they need to make a real profit. I would be looking for natural gas prices to rise substantially over the long term once the accounting games in the shale sector are revealed and the SEC is surprised by the deceptive practices.

"Some of these parcels are in or near the Green River Formation, an oil-rich region in Colorado, Utah and Wyoming that's been called the "Persia of the West."

How is that for hype? Persian reservoirs have a very high energy density and require little energy investment for each unit of energy produced. The Green River Formation does not have a high energy density and has a negative energy return on the energy investment in most formations.

We have been hearing all kinds of claims about shale oil and gas for decades and have yet to see any cases where companies have been able to make a decent return by developing a broad areas. Profits have been fleeting and only available to groups smart or lucky enough to find a sweet spot in the general formation.